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2016 (1) TMI 1341 - AT - Income TaxReopening of assessment - proof of issuance / receipt of notice u/s 143(2) - reasons to believe - Held that - here was no fresh tangible material forwarded by the ADIT (Inv.) vide letter dated 24.03.2011 which was the foundation on which the AO has made up his mind on 25.03.2011, to reopen the original assessment completed u/s 143(3) of the Act which was supervised by Additional Commissioner u/s 144A and thereafter the Commissioner exercising his revisional power u/s 264 of the Act. Also, we find force in the contention of the ld. AR that there was no evidence in the hands of the AO while he took the sanction of Commissioner u/s 151(2) to reopen the original assessment completed u/s 143(3) after 4 years. The process of manufacture of the Pan Masala was already on record during the original assessment and simply by saying that manufacturing process from stage A to H did not take place at the eligible unit without a shred of evidence to support the said information cannot be termed as a new tangible material and link to base a reason to believe escapement of income. Therefore, the entire reopening is vitiated on this count. In the present case, the ld. DR could produce before us only an order sheet dated 24.11.2011 wherein it is written by the AO that notice u/s 143(2) has been issued; other than that there is no mention of the mode of service, when it was dispatched etc.. Her assertion that the Director and GM (Taxation) has appeared before the AO on 28.11.2011 goes to show that they have appeared pursuant to the receipt of notice u/s 143(2) cannot be accepted because it is clearly written on the order sheet on 28.11.2011 by the AO that the assessee had submitted objection in respect to reopening of the assessment and this fact is stated by the AO in the impugned reassessment order. We had given time and directed the ld. DR to file affidavit, if any, of the AO to support the claim of issuance / dispatch / service of the 143(2) notice, however, we find that the ld. DR have not filed any affidavit on behalf of the Department to support their contention that AO in fact had issued the notice. The ld. DR fairly conceded that neither could she trace a copy of the notice u/s 143(2) nor could bring copy of the dispatch register to buttress her claim that in fact, notice u/s 143(2) had been issued. In such a scenario, mere order sheet entry without following up by issuance 143(2) notice as required by law and dispatching the same to the correct address of the assessee and by merely mentioning that 143(2) notice has been issued in the show cause notice for special audit cannot substitute the mandatory requirement of law in respect to issue of notice u/s 143(2) in reassessment proceedings as held by Hon ble Supreme Court in Hotel Blue Moon (2010 (2) TMI 1 - SUPREME COURT OF INDIA). Therefore, on this count also, the assessee succeeds and the entire reassessment proceedings is vitiated for non-issuance of 143(2) notice by the AO. - No material neither tangible nor incriminating material in the hands of the AO to assume jurisdiction to reassess the assessee, so AO has erroneously usurped jurisdiction which law does not permit him to do on the reasons given above, so the entire action of AO is ab-initio void and is quashed. - Decided in favour of assessee.
Issues Involved:
1. Legality of reopening the assessment under section 147. 2. Validity of sanction under section 151. 3. Non-issuance and non-receipt of notice under section 143(2). 4. Applicability of section 292BB. 5. Whether the reassessment amounts to a review or change of opinion. Issue-wise Detailed Analysis: 1. Legality of Reopening the Assessment under Section 147: The Tribunal found that the reopening of the assessment was not based on any fresh tangible material. The AO's reasons for reopening were based on a flowchart of the manufacturing process that was already part of the original assessment proceedings. The Tribunal noted that the original assessment had been completed under section 143(3) with the supervision of the Additional Commissioner under section 144A and reviewed by the Commissioner under section 264. The Tribunal held that the reasons recorded for reopening did not indicate any new material that could suggest escapement of income. The Tribunal emphasized that the reasons must have a direct nexus or live link with the income escaping assessment, which was not present in this case. Therefore, the reopening of the assessment was held to be invalid. 2. Validity of Sanction under Section 151: The Tribunal examined the sanction granted by the Commissioner and Additional CIT under section 151 and found that it was given in a mechanical manner without due application of mind. The Tribunal noted that the reasons recorded by the AO did not mention any specific facts or material that were not disclosed by the assessee. The Tribunal referred to the decision of the Hon'ble Supreme Court in Chhugamal Rajpal vs. S.P. Chaliha & Ors. - 79 ITR 603 (SC) and held that the sanction granted by the Commissioner was invalid. Consequently, the notice issued under section 148 was also held to be bad in law. 3. Non-issuance and Non-receipt of Notice under Section 143(2): The Tribunal found that the AO had not issued the mandatory notice under section 143(2) within the prescribed period. The Tribunal referred to the decision of the Hon'ble Supreme Court in Hotel Blue Moon [(2010) 321 ITR 362 (SC)], which held that the issuance and service of notice under section 143(2) is mandatory and not a curable defect. The Tribunal noted that the Department could not produce any evidence of issuance or service of the notice under section 143(2). Therefore, the reassessment proceedings were held to be invalid due to the non-issuance of the mandatory notice under section 143(2). 4. Applicability of Section 292BB: The Tribunal held that section 292BB, which deems notice to be valid if the assessee has participated in the proceedings, is applicable only from the assessment year 2008-09 onwards. Since the present case pertains to the assessment year 2004-05, section 292BB was not applicable. The Tribunal referred to the decision of the Hon'ble jurisdictional High Court, which upheld the Special Bench decision in Kuber Tobacco Product Pvt Ltd 117 ITD 273, stating that section 292BB is prospective in operation. Therefore, the non-issuance of notice under section 143(2) could not be cured by section 292BB. 5. Whether the Reassessment Amounts to a Review or Change of Opinion: The Tribunal found that the reassessment proceedings were based on the same set of facts that were already examined during the original assessment proceedings. The Tribunal noted that the issue of deduction under section 80IC was extensively considered in the original assessment and the subsequent proceedings under sections 144A and 264. The Tribunal referred to the decision of the Hon'ble Supreme Court in CIT vs. Kelvinator of India Ltd. (320 ITR 561) and held that the reassessment was based on a mere change of opinion, which is not permissible under the law. Therefore, the reassessment was held to be invalid. Conclusion: The Tribunal allowed the appeal of the assessee and quashed the reassessment proceedings on multiple grounds, including the lack of fresh tangible material, invalid sanction under section 151, non-issuance of notice under section 143(2), inapplicability of section 292BB, and the reassessment amounting to a change of opinion. The appeal of the revenue was dismissed.
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